The ROI of Enterprise Data Management

I recently went on a skiing trip with my family. A trip like this isn’t cheap, but the ROI for us is high: awesome skiing conditions, close family time, and a chance to actually do an activity with our teenagers rather than just watch from the sidelines. As the commercial tagline goes: priceless.

The ROI from a company’s investment in Enterprise Data Management (EDM) is measured with somewhat less touchy-feely metrics such as  dollars and time savings, faster time-to-market,  and increasing sales through more directed marketing (up-sell, cross-sell, better demographic targeting).

However, there are also benefits that are harder to quantify that may be even more significant, such as governmental and regulatory compliance, financial transparency, improved data consistency and integrity, faster data availability and using performance management to run the business. Even these benefits are not touchy-feely and you need to quantify the impact they will have to your business.

Okay, the potential for significant ROI from your EDM should be a no-brainer but… A few years ago I came across a survey from Cutter Consortium that found that only 15% of firms surveyed considered their data warehousing efforts to date a major (my emphasis) success. What would the other 85% say their ROI is? They are probably embarrassed to say.

ROI shouldn’t be an elusive goal. The key critical success factor to ensure EDM success and a significant ROI is the relationship and cooperation between business and IT. The make-or-break of your data management efforts isn’t the technical prowess of your IT staff, but whether the business is involved (wholeheartedly) in your EDM effort.

If you think of it as a three-legged stool, the three legs are: sponsorship (funding it), participation (being involved day-to-day in its creation) and governance (managing it as a key business process.) 

IT and the business should form a steering committee to sponsor and govern design, development, deployment, and ongoing support. It needs both the CIO and a business executive, such as CFO, COO, or a senior VP of marketing/sales to commit budget, time, and resources.

Everyone’s got a stake in the project. The business sponsor needs the project to succeed so the business group will get the information it needs to provide strategic advice to help run the business. The CIO is committed to what is being built and how. Her job is to help the business group get what they need to succeed.

How do you calculate the ROI of a successful project?  It’s going to be different for every situation. Here are some potential business benefits (that you will need to quantify for your company):

• How many days have you reduced from the budget, planning and forecasting cycle? How much time have you reduced from the monthly budget to actual review cycle? What is the value of shifting your financial group from gathering data to analyzing it? What is the value to the business groups scattered across your enterprise of being able to manage their business rather than playing with spreadsheets?
• How much do you save by meeting financial reporting and regulatory compliance with consistent information and automated analysis, validation, and distribution of your reports without any scrambling or tense, late nights?
• How much impact can Marketing have on profitability now that you’ve reduced report time from weeks to minutes, giving them real-time visibility into the impact of the new pricing and promotional strategies they’re experimenting with?
• What’s the top-line impact knowing that a certain product is now selling like hotcakes in a previously untapped geography, and being able to shift stock, re-price the product to remain competitive and profitable, and provide manufacturing with the data it needs to plan for ramping up inventory?
• How many data shadow system spreadsheets did you eliminate, thereby ensuring that everyone is using the SAME data? How many arguments over who has the right data has this eliminated? How much did those conflicting decisions cost the enterprise before?

EDM projects need to be driven by business value. These projects no longer succeed by merely having the most data (the biggest multi-terabyte DW) or functionality (the hottest BI or CPM tool). There are many non-technical, i.e. BUSINESS, aspects to these projects that determine their success or failure from a business perspective.

Business and IT groups together need to implement EDM. With this business focus, there surely will be a significant business ROI.

Comments

[Boblambert12]

Great post, you don't hear enough about the need for a business case for data management or DQ, so I was pleased to come across this article.
Bottom line: if there's no $$ in it no one with do it.
Thanks!
Bob Lambert

[Rick Sherman]

Thanks Bob. The days of "if we build they'll come" & certainly "if I propose it they'll fund it" are gone...and that's good.

One should be able to build a pretty strong business case for data governance, data quality program and strong data management processes to support both at most enterprises but IT needs to talk to & understand business people. IT also needs to understand the industry they are in whether it's financial services, retail, health case, higher education or whatever in order to really understand the impact of DQ & DG.

Here's hoping more people build that business case because in the end it's the business that suffers without DQ, DG & DM.

Rick

[dashboards on demand]

Blending business values into edm projects is obviously helpful as you mentioned. A combines effort of IT and business team is such a need to achieve the target.